McDonald’s is looking for local franchise partners in Malaysia and Singapore and is currently speaking to candidates. According to an article on Bloomberg, the sale of the franchise rights could bring in about US$400 million and negotiations have already begun.
Currently McD’s has over 131 stores in Singapore and more than 250 in Malaysia.
“McDonald’s has taken the decision to adopt a development licensee model for the Malaysia and Singapore markets in order to enable focused investment in the brand and speed up growth in these key Asian markets,” a spokesperson told Marketing.
She added the Development Licensee is a franchising model that McDonald’s has been using for more than 30 years and in more than 65 markets worldwide. Currently, Singapore and Malaysia’s immediate neighbours in Thailand, Indonesia and the Philippines are all development licensee models, as is South India and the entire Middle East. Also the Corporation has recently announced it is seeking DL partners for China, Korea and Hong Kong.
China, Korea and Hong Kong collectively represent more than 2,800 restaurant locations, the majority of which are currently company-owned. Those countries are included within the company’s High-Growth Markets, a segment which includes countries with relatively higher restaurant expansion and franchising potential.
The company also intends to add more than 1,500 restaurants in China, Hong Kong and Korea over the next five years.
The move comes a year after McDonald’s president and chief executive officer Steve Easterbrook announced his turnaround plan for the company which included a restructuring of McDonald’s worldwide business and financial updates. The company looks to refranchise 1,500 restaurants by 2016 and 3,500 by 2018.
Easterbrook also said the company’s prioritites are now threefold – driving operational growth, returning excitement to the brand and unlocking financial value. He added Asia represents a significant area of opportunity for McDonald’s to blend its global quality standards with local insights and expertise from partners.
“This will allow McDonald’s to accelerate our growth and scale faster across diverse markets placing us closer to our customers and the communities we serve. We’re in the midst of transforming our business and taking a strategic and thoughtful approach to enhance our ability to grow around the world. These actions build on our turnaround efforts and will advance local ownership, enable faster decision-making and achieve restaurant growth.”
In a conversation with Marketing, Nick Foley, president of Landor Southeast Asia Pacific & Japan for Landor, added that McDonald’s franchising should not leave consumer worried because they have “written the rule book on franchising”.
“No doubt to franchise can be dangerous but McD’s set the bar on how to do it right. it is a strongly established brand with values ingrained into its employees and franchise partners. A lot of company branding is actually about consumers’ knowledge of your brand and esteem they hold your brand. McDonald’s has noth the brand ethos, guidelines and trust of consumers,” he added.
As part of a way to advance growth in Asia, the company also recently announced its intent to identify strategic partners in Taiwan and Japan. Last year, McDonald’s committed to strategically evaluate ownership structures in markets around the world with the overall goal of reducing the number of restaurants that the company owns and operates.
The result of this will be to place more restaurants under local ownership, in the hands of local franchisees, with a long-term goal of being 95% franchised. The identification of strategic partners in Asia is consistent with this strategy.